Tableau Software shares went into freefall following last night’s licensing revenue miss, although the company actually slightly beat the overall revenue estimate and significantly beat on earnings per share. Perhaps the even bigger problem though was the reduction in guidance, what was a huge shock to the Street. A chorus of analysts has slashed their price targets for the stock amid pressing concerns.
Tableau cuts guidance
Tableau posted $133 million in licensing revenue for the fourth quarter, which came up only slightly short of the consensus of $134.5 million. Revenue was $202 million, while earnings were 33 cents per share, compared to the consensus estimates of $201 million and 16 cents per share.
Management guided for first quarter revenue of between $160 million and $165 million, significantly missing the consensus of $180 million, and losses of between 8 cents and 12 cents per share, which was significantly lower than the consensus of earnings per share of 6 cents. For 2016, they lowered their revenue outlook to a range of $830 million to $850 million from the previous range of between $845 million and $865 million.
Plenty to worry about in Tableau Software’s earnings report
Although Barclays analyst Raimo Lenschow continues to rate Tableau at Overweight, he lowered his price target 39% from $110 to $67 per share and was quite concerned about last night’s earnings report. He said the 31% growth rate in licensing is the lowest in the company’s history and a meaningful deceleration from the 57% growth witnessed in the third quarter. Management said the weakness in license revenue was because existing customers expended in smaller increments than what they were expecting but failed to explain why.
Lenschow believes it could be because customers paused their purchases as Microsoft’s Power BI entered the market. He also suggests that because Tableau Software now must target central IT departments, a strategy that’s rather new to the company’s sales force. He doesn’t think either of these two problems will be resolved soon.
D.A. Davidson analyst Jack Andrews also thinks a natural pause may be going on at Tableau Software, citing his study of “technology buying cycles.” He said the sheer number of available tools for analytics and visualization has exploded, so customers are simply taking time to evaluation the many new options. He added that many of the customers he has spoken with love the company’s products and even went so far as to compare them to Apple’s iPhone, emphasizing that while there may be trouble for now, Tableau could end up being a winner in the long term. He also cut his price target, bringing it from $145 to $101.
A warning for the broader market?
Baird analyst Steven Ashley had a bit of a different take on the problems at Tableau. He cut his target from $100 to $80 per share and suggested that the company might end up being the “proverbial canary in the coal mine.” In other words, the problems facing it might be an early warning sign for larger companies in the space. He noted that the firm’s deal sizes are among the smallest in the industry and its sales cycles are also among the shortest, which could mean that it might be one of the first to be impacted by a “downturn in new pipeline business due to a macro weakness.”
When asked about competition, which includes Microsoft’s offering, management didn’t seem too worried, and Ashley added that other smaller companies in the space aren’t worried about Microsoft either.
Other price target cuts
A host of other firms also cut their price targets for Tableau Software, including Pacific Crest, which cut its target from $138 to $93, and Wedbush, which slashed its target from $97 to $68. Goldman Sachs analysts cut their target from $99 to $61, while Credit Suisse halved its target from $130 to $65.
Tableau Software shares tumbled to as low as $42.58 during regular trading hours, battling with LinkedIn for the title of Worst Stock of the Day.
